The yen climbed strongly on Wednesday after Japanese purchasing managers signalled the fastest growth in manufacturing output for three months.
Nikkei's flash Japan manufacturing purchasing managers' index (PMI) showed rising growth in business activity in the country's export-led economy in August.
The flash estimate of August PMI showed the headline index rise to 52.8 from 52.1 in July, while the manufacturing output index rose to 53.1 from 51.4 – its fastest growth since May.
Growth was driven by faster-paced rises in new orders, new export orders and employment. A PMI reading above 50 indicates economic expansion.
Official growth figures published earlier this month, showed Japan's economy grew for a sixth-consecutive quarter in the April-June period.
This extended Japan's longest period of unbroken expansion in more than 10 years as robust growth in domestic demand helped offset weaker exports.
One of the "three arrows" of Abenomics – the principal tenets of Prime Minister Shinzo Abe's economic policy – has been structural reform, and that includes stimulating domestic demand, traditionally a weak area of growth.
Demand mix improves
Indeed, the PMI data were also indicative of stronger demand from both at home and overseas.
Paul Smith at IHS Markit said: "August’s PMI survey provided another positive set of data on the health of Japan’s manufacturing sector, with growth rates of output, new orders and employment all improving."
He added: “Expansion continues to be supported by a mix of strengthened demand from both domestic and external sources: public work projects and stronger sales to South East Asia."
The yen was stronger against its main rivals, up 0.1% against a resurgent dollar, and gaining 0.1% versus the pound.
Against its regional rivals, the yen gained 0.3% to Y86.43 on the Australian dollar, 0.8% on the New Zealand dollar to Y79.13 and 0.1% to Y13.99 on the Hong Kong dollar.
On stock markets, both the Nikkei 225 and the broader Topix index closed 0.3% higher.